Earned-wage access (EWA) providers might soon need to disclose more costs associated with their products, including “tips” and expediting fees. Under a recent proposal from the Consumer Financial Protection Bureau (CFPB), these items would be classified as finance charges, which could escalate the advertised costs of payroll advances.
EWA products allow employees, particularly hourly workers, to access portions of their earnings before the scheduled payday. This service is widely utilized by significant employers such as Walmart Inc. and Amazon.com Inc. as part of their employee retention strategies.
One of the components of EWA services includes the option for customers to pay a “tip” for the service. Consumer advocates have previously raised concerns that these optional tips, as well as associated fees for expedited services, may mask the true cost of accessing wages early.
By requiring these costs to be clearly disclosed, the CFPB aims to provide more transparency and protect consumers from potentially hidden charges. This proposal sets the stage for a potential clash with state laws that may have more lenient disclosure requirements.
For further details on the CFPB’s proposal and its implications, you can read the full article here.